The remaining
foreign currency-denominated debt owed by Sri Lanka for repayment over the
remainder of the year falls below US$ 500 million, like last week, the Central
Bank settled its US$ 1.0 billion sovereign debt due on October 4, including
coupon payments due at the time of settlement. 'On October 2, 2020, on behalf
of the Government of Sri Lanka, the Central Bank of Sri Lanka effectively
finalized the settlement of the maturing US dollar 1 billion Foreign Sovereign
Bond (ISB) along with the due coupon payments,' the Central Bank said in a
statement released on Friday.
With this
settlement, Sri Lanka now has a remaining foreign currency debt of US$ 438.6
million maturing from October 5 to December 31. Hence, alleviating fears about
the country's ability to fulfill its foreign currency debt in the face of
impaired access to international capital markets to roll over such debt
triggered by market unrest caused by a pandemic.
Last week, Moody's
Investors Service issued a rare two-tier downgraded from B2 to Caa1 on the Sri
Lankan sovereign, revising the outlook to stable from negative, citing Sri
Lanka's high risks of debt refinancing, strained fiscal deficit and governance,
and institutional vulnerabilities. Many, including the private sector, were
shocked by the fact that the rating reduction came on the verge of a
billion-dollar bond settlement and, despite the government's repeated
assurances of its capability and commitment to connecting debt obligations as
they come due.
This settlement and other recent positive
improvements in the Sri Lankan economy have positively responded from the
domestic foreign exchange market. The expected inflows to the domestic foreign
exchange market, backed by constructive steps taken by the State of Sri Lanka
and the Central Bank of Sri Lanka, are expected to reinforce market sentiment
further in the period ahead," it added.
The data shows that
Sri Lanka has US$ 4.6 billion in foreign currency debt repayments due in 2021.
This data includes principal payments of US$ 3.6 billion and interest payments
of US$ 996 million. By the end of August, Sri Lanka had US$ 7.4 billion in
foreign currency reserves. Still, debt settlements could have dented their
position, as, during September, there were US$ 991.2 million in debt repayments
and US$ 1.031 million in bond settlements on October 2.
Nevertheless, the
narrowing gap in the merchandise trade account due to the rapid recovery of
exports and the slowing down of imports, and the $700 million owed by the China
Development Bank as the additional tranche of the $1.2 billion syndicated
facility could partially offset the full impact of debt repayments on the
reserves.
OSL Take: The
decrease in foreign debt in Sri Lanka is indicative of the level of confidence
in Sri Lanka's economy and investment interest. Therefore foreign investors
could confidently explore investment opportunities in Sri Lankan bonds.
Sri Lanka's export
portfolio expanded continuously, and now poultry will add to the long list of
exports. Further improving the
discussion between the World Bank and the Sri Lankan government would result in
a further increase in development assistance to the island nation. This
initiative is an encouraging sign for foreign businesses/investors keen on
doing business with Sri Lanka since the interest shown by multinational lending
agencies would help secure funding for large scale projects.
No comments:
Post a Comment